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The Top Financial Mistakes Business Owners Must Avoid
In business, there’s no one right way to handle things and move forward, as every industry, niche, and specific organization operates differently and has different goals along the way. However, when you run a venture, there are some common issues and mistakes to be wary of that can face every entrepreneur, no matter what they sell or how they sell it.
In particular, you want to avoid making financial blunders that can cost you not only sales and profits but potentially your entire business. Many people have to shut down or sell their ventures each year due to financial difficulties, sadly. But you can do your best to avoid ending up in this situation by steering clear of many of the most common mistakes related to cash flow and finance.
Mistake: Not Tracking and Managing Finances Properly
Many entrepreneurs do themselves a disservice by not properly tracking and managing their venture’s finances. You must keep a close eye on cash flow and other financial matters as it gives you a good idea of the health of your business and ensures you can keep operating.
To get ahead in the business game, you need to be able to read and understand key reports and figures, such as profit and loss info, balance sheets, income statements, and tax-related issues. You must control procurement costs and minimize payroll expenses where possible, and be wary of outlaying too much money on expenses like leases or mortgages, general office costs, travel, equipment, and marketing fees.
Use tech tools that enable you to see, at a glance, how your business is performing, and look out for finance-related issues that are small now but could turn into much bigger problems before you know it.
Mistake: Failing to Save Enough Money for Challenging Periods
When you’re caught up in building a brand, it’s natural to concentrate on investing money in all the steps you need to take to generate awareness and sales and fulfill orders. However, don’t get so lost in this growth element that you forget to save some money for a rainy day, too. You never know when times might turn lean and cash flow dry up.
As such, save some money to cover your expenses in tougher periods. While there’s no set figure or percentage to keep set aside to cover bills and keep trading during downtowns or emergencies, many financial planners and other experts recommend business owners put at least three months’ worth of expenses away. Keep this money in a savings account used only for contingencies and not general, everyday bills.
Mistake: Not Getting Educated on Tax Obligations
Another common financial blunder made by business owners is not learning what they need to about their tax obligations. While this topic may not be the sexiest, it’s crucial to understand and pay attention to. Many people get in financial trouble because they’re not aware of what they have to do, tax-wise, or don’t follow through and complete such tasks.
You must submit relevant, completed paperwork on time every year and pay your tax bills when they’re due. You might outsource a lot of accounting work to specialists but remember that it’s still your responsibility to check documents, fix errors, and pay accounts.
Mistake: Not Being Proactive Enough Regarding Investors and Loans
If you want to expand your business or get a short-term loan to cover shortfalls during a busy trading period, you’ll likely need to either find investors for your venture or approach banks and other financial institutions for a loan. Don’t make the mistake of leaving this job until the last minute. It takes time to compile paperwork for investor pitches and loan applications and to hear back from people, too.
Also, you’ll need to research and evaluate your options. Plus, the last thing you want is to miss out on some excellent business opportunities or have to close or sell your firm because you couldn’t access additional cash in the necessary timeframe. It’s essential to be proactive and seek out what you need before it comes to crunch time.
You should also avoid making financial mistakes such as setting your prices too low, targeting too small a customer niche and limiting sales, and not taking out enough or the right insurance cover. Furthermore, be wary of hiring the wrong people and letting employees access and spend too much money in your organization.
Also, many people make the mistake of not getting proper advice, so seek out qualified people to learn from and pay for consultations as needed. The more financial blunders you can avoid over the years, the better your chances of long-term business success.
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DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages.
TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business, CyberSchmooz, and BizCafe.